Marginal Standing Facility or MSF – Rate, Definition, Short Note

Marginal Standing Facility (MSF) Rate- Definition/Meaning of Marginal Standing Facility (MSF) by Reserve Bank of India (RBI). What is MSF?

Marginal Standing Facility (MSF) is the rate at which scheduled banks could borrow funds overnight from the Reserve Bank of India (RBI) against approved government securities.

RBI-Reserve Bank of IndiaBanks can borrow funds through MSF during acute cash shortage (considerable shortfall of liquidity). This measure has been introduced by RBI to regulate short-term asset liability mismatches more effectively.

The Marginal Standing Facility (MSF) is pegged 100bps or 1 % above the Repo Rate.

To provide greater liquidity cushion the Reserve Bank of India (RBI) introduced Marginal Standing Facility or MSF. RBI announced the introduction of MSF on May 3, 2011 and it was effected from May 9, 2011.

Reserve Bank of India, in it’s annual policy statement, has declared “The stance of monetary policy is, among other things, to manage liquidity to ensure that it remains broadly in balance, with neither a large surplus diluting monetary transmission nor a large deficit choking off fund flows.”

Marginal Standing Facility Rate: Under this scheme, Banks will be able to borrow upto 2% (wef 17/04/2012) of their respective Net Demand and Time Liabilities (NDTL).

Some Important Questions on Marginal Standing Facility (MSF):

1. What is the Present Marginal Standing Facility (MSF) Rate?
Answer: 9% (As of April 1, 2014)

2. What is Marginal Standing Facility (MSF)?

Answer: Already explained above.

3. MSF is costlier than Repo Rate, then Why do banks borrow money from RBI using MSF?

Answer: Yes, MSF is 1% costlier than the Repo Rate. But usually banks borrow money from RBI during acute cash shortage.

If you have any queries/questions please ask in comment section.

39 thoughts on “Marginal Standing Facility or MSF – Rate, Definition, Short Note

  1. @admin, thank you for the post.

  2. Sweta Singh21 says:

    thanx a lot..very informative

  3. what is the benifit of msf over repo rate please clear it…

  4. Praveen wagmode says:

    what is the net demand and time liabilities (NDTL) ?

    • in simple words u cn say ndtl as total deposit in the bank either its is demand deposit aur time deposit.

    • Accounts like Savings,Current Deposits etc are Demand liabilities for the bank through which user can take money at any time . 
      In short User can demand money from bank and bank has to give it . 
      Time liability are account like Fixed deposits etc which bank has to give only after certain period of time .

  5. Sudhakar singh says:

    when we have bank rate than what is need of msf plz clear msf

  6. For what time frame is the msf is taken

  7. can u pl allow copy facility from the site for convenience… it defeats entire purpose of searching very good answers and then not being able to use them for studies… practically it is not possible to open these pages every time, we revise

  8. for those who want to copy, Right click and print save as PDF, and enjoy!!!!!!!!

  9. Rajesh Rupeshdas says:

    under MSF bank can borrow money up to 1%  of  their respective NDTL.
    check it out in RBI site.

  10. Subodh kumar says:

    Tell me the defenition of BANk.

  11. Pallekala Suryakiran says:

    when the bank faced the shortfall or liquidity?

  12. Pallekala Suryakiran says:

    when the bank faced short fall of liquedity?

  13. so wat is d diiference between bank rate and msf?

    • repo rate interest we paying to rbi after 90 days we call that is bank rate. bank rate=repo rate + 1 .
      msf is used to take maintain SLR & CRR in banks this will take for overnight

  14. how this MSF will help in growth of our economy and how does it help in curbing inflation and CAD

  15. What is the main use of MSF?

  16. What are main tools used by RBI to control liquidity

  17. why banks borrow money from RBI using MSF, REPO is also for short term.Please explain

  18. msf is more costly than reporate so why do banks need to borrow funds even during acute cash shortage.

  19. now MSF rate is 10.25%

  20. HIROK NASKAR says:

    What is OMO?

  21. Sripada Balaji says:

    would you please tell what is the minimum and maximum range of MSF?

  22. What are the different types of msf ?

  23. What is ndtl

  24. it’s 300 points now!!!

  25. sir i have confusion in the difference between repo rate and bank rate….please clear it with example

  26. difference between bank rate and msf